Ex-Insys CEO to plead guilty to opioid kickback scheme

[December 27, 2018]  By Nate Raymond

BOSTON (Reuters) - The former chief executive of Insys Therapeutics Inc <INSY.O> has agreed to plead guilty to participating in a scheme to bribe doctors to prescribe a powerful opioid medication in order to boost its sales, U.S. prosecutors said on Wednesday.

Michael Babich, who resigned as the Arizona-based drugmaker's CEO in 2015 and was due to face trial next month, has agreed to plead guilty to conspiracy and mail fraud charges, federal prosecutors in Boston disclosed in a court filing.

Five former Insys executives and managers indicted along with Babich, including John Kapoor, the company's founder and former chairman, remain scheduled to go on trial in late January. They have pleaded not guilty.

The terms of Babich's plea deal were not disclosed, and it was unclear whether he would agree to cooperate with prosecutors and testify at that trial, as has another former Insys executive who recently pleaded guilty to racketeering conspiracy.

Prosecutors requested a Jan. 9 plea hearing. A lawyer for Babich, 42, declined to comment.

The case centers on Subsys, Insys' under-the-tongue spray for managing pain in cancer patients. It contains fentanyl, an opioid 100 times stronger than morphine.

Prosecutors allege that from 2012 to 2015, Kapoor, Babich and others conspired to bribe doctors in exchange for prescribing their patients Subsys. Prosecutors said they also defrauded insurers into paying for Subsys.

Prosecutors allege Insys paid doctors kickbacks in the form of fees to participate in speaker programs ostensibly meant to educate medical professionals about Subsys that were actually shams.

A box of the Fentanyl-based drug Subsys, made by Insys Therapeutics Inc, is seen in an undated photograph provided by the U.S. Attorney's Office for the Southern District of Alabama. U.S. Attorney's Office for the Southern District of Alabama/Handout via REUTERS

The case has been brought amid a national opioid addiction epidemic. According to the U.S. Centers for Disease Control and Prevention, opioids were involved in around 47,600 overdose deaths in 2017.

Babich, who was originally indicted in 2016, is married to a former Insys sales representative, Natalie Babich, who in 2017 pleaded guilty to conspiring to pay kickbacks and became a government witness.

She testified this month at the trial of Christopher Clough, a former physician assistant in New Hampshire accused of accepting kickbacks from Insys. A federal jury in Concord, New Hampshire convicted Clough on Dec. 18.

In August, Insys said it had agreed to settle a related U.S. Justice Department probe for at least $150 million.

(Reporting by Nate Raymond; editing by Alexia Garamfalvi and Rosalba O'Brien)

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